Posted on Wednesday, 12th August 2009 by Keane Unclaimed Property Team
Another state recently introduced new legislation to increase revenues by modifying how escheatment, gift cards, and dormancy periods are managed.
Specifically, California introduced bill CA A77c on July 16, 2009. This bill proposes removing the exemption for the escheat of gift certificates and gift cards. The unclaimed property law would now apply to all unredeemed gift certificates and would require escheat of the property to the state 3 years after the issuance of the gift certificate unless the rightful owner comes forward to make claim for or use the credit. The new escheatment-gift card law would apply to gift certificates issued commencing July 1st of 2006. The state proposes to use the revenue generated from the escheat of gift cards for the purpose of funding poison control centers.
This recent proposal in California follows a trend. In these difficult economic times, many states are attempting to change their unclaimed property laws to raise state revenues without increasing taxes. Back in June we discussed a Wall Street Journal article surrounding escheatment, gift cards, and gift certificates in South Carolina and Texas.
According to statistics provided by the TowerGroup, a financial consulting firm, Americans fail to redeem $6.8 billion in gift cards each year. With all states in dire need of additional revenues, many are considering unclaimed property to be an area of focus. For example, New York was able to claim $9.6 million in unredeemed gift cards in 2008.
While the original purpose of these types of rules for escheatment, gift cards, and unclaimed property programs in general, was not to generate revenue for the state, that’s what seems to be happening more and more. Given this reality, lawmakers are now frequently earmarking the revenues generated from particular unclaimed property collections to specific public causes to make the bills more palatable.
A variation on this approach was incorporated in the recently proposed Arizona bill HB 2007/SB 1025 which seeks to drastically reduce unclaimed property dormancy periods in that state. If passed, the bill would appropriate the first $10.5 million of revenue in each fiscal year to the housing trust fund. The second $24.5 million collected would be deposited each fiscal year in the department of revenue administration fund. The remainder goes to the state general fund.
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